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By Kate Streit
Once upon a time, if you needed to deposit a check or pay a bill, you’d have to head to a local branch of your bank in person. However, with the rise of digital banking, going to a physical bank now seems antiquated. Chances are, you do most -- if not all -- of your banking online these days. With more and more businesses accepting debit and credit cards or even mobile payments, even trips to the ATM are becoming less necessary.
Digital banking has been around since the infancy of the internet itself. Fun fact: In 1994, around 100,000 households began accessing their bank accounts online via Microsoft Money. That same year, Stanford Credit Union also began offering banking services on their website, becoming the first financial institution in the nation to offer online banking to all customers.
With the advent of smartphones and mobile banking apps, digital banking has become more popular than ever. According to a 2019 survey by Go Banking Rates, 76 percent of Americans would not consider opening an account with a bank that does not have a mobile app. Four in 10 Americans choose to manage their bank accounts online.
There are some major advantages to digital banking. First, it offers convenience to the customer. Who needs to take time out of their day to swing by the bank when they can do it all with a few swipes and clicks from their phone? With the rise of peer-to-peer mobile payment apps, you can even split bills and pay friends back with ease, all from your phone.
With constant access to your transactions, you can also keep closer tabs on your money, and spot a problem sooner. Mobile banking allows you to sync your bank account app with other money apps to help you budget, save and reach other financial goals.
The next big trend in digital banking is the introduction of block chain technology, which utilizes cryptography to allow information to be distributed, but not copied. Blockchain originated with the digital currency Bitcoin, but it’s also being developed for use in a number of other aspects of financial services, including digital payments, escrow services and loan processing. Blockchain technology carries no transaction cost, and also offers superior security.
Another major shift on the horizon is the growth of digital-only banks. According to Cornerstone Advisors, people of different generations are interested in digital banks for different reasons. Millenials are after better financial management tools, debit card rewards and interest rates, while Baby Boomers and Gen Xers are mostly focused on superior interest rates.
Also known as “challenger banks” and “neo banks,” some of the pioneers in the digital banking industry include U.K-based Monzo and Atom Bank. In addition to the aforementioned benefits, customers are increasingly turning to digital banks for ease of setup and lower fees. Because of their lower overhead costs, digital banks can also generally accept customers who may be shut out of traditional financial services because of insufficient or poor credit.
If all that’s not enough to convince you that digital banking is the way of the future, artificial intelligence is also being incorporated into the banking industry. By studying your bank account transaction by transaction, AI will be able to more quickly detect fraud. What’s more, this technology will “get to know” its customers and offer a more personalized experience. For example, high-net worth individuals may receive information about investment opportunities, or new parents may be prompted to open up college fund for their child.
Even if you’re not ready to give up every aspect of traditional brick-and-mortar banking in favor of a digital-only experience, the fact remains that digital banking is here to stay.
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